19 March 2013 External T.I. 2012-0470381E5 - medical expense tax credit

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Is the refundable Ontario Healthy Homes Renovation Tax Credit (OHHRTC) considered an amount that a taxpayer is "entitled to be reimbursed" for the purposes of paragraph 118.2(3)(b) of the Income Tax Act (the "Act")?

Position: Depends of the facts, but likely yes.

Reasons: The definition of reimburse is sufficiently broad to encompass the OHHRTC.

XXXXXXXXXX
2012-047038
N. Shea-Farrow
March 19, 2013

Dear XXXXXXXXXX:

Re: Technical Interpretation Request – Medical Expense Tax Credit

We are writing in response to your e-mail of November 11, 2012 requesting our comments with respect to whether the refundable Ontario Healthy Homes Renovation Tax Credit (OHHRTC) is considered an amount that a taxpayer is "entitled to be reimbursed" for the purposes of paragraph 118.2(3)(b) of the Income Tax Act (the "Act").

Our comments

Paragraph 66 of Interpretation Bulletin IT-519R2 (Consolidated) - Medical Expense and Disability Tax Credits and Attendant Care Expense Deduction, describes the CRA's views with respect to paragraph 118.2(3)(b) as follows:

Paragraph 118.2(3)(b) provides that qualifying medical expenses of an individual do not include any expense for which the individual, the patient or the legal representative of either such person has been, or is entitled to be, reimbursed except to the extent that the amount is required to be included in income and cannot be deducted in computing taxable income. Thus, for example, an amount reimbursed under a public or private medical, dental or hospitalization plan would not qualify for purposes of the medical expense tax credit. However, an amount reimbursed by an employer that is included in the employee's income would qualify provided the employee is not able to deduct the amount in computing taxable income.

In the situation you describe the taxpayer receives an OHHRTC in respect of otherwise qualifying medical expenses. The Act does not define "reimburse". The definition of reimburse according to the Concise Canadian Oxford Dictionary means to repay a person who has expended money or repay a person's expenses. In our opinion the definition of reimburse is sufficiently broad to encompass an OHHRTC paid or credited to a taxpayer in respect of the money he or she has spent on otherwise qualifying medical expenses.

Assuming that paragraph 12(1)(x) of the Act does not apply since the amounts are unlikely to be received in the course of earning income from a business or property, it is likely that in most cases the amounts would not be included in computing income of the taxpayer and would not likely be deductible in computing taxable income. Therefore the amount of OHHRTC that a taxpayer has been, or is entitled to be, reimbursed in respect of otherwise qualifying medical expenses would need to be deducted from those expenses for purposes of the medical expense tax credit under section 118.2.

It is our understanding from your letter that you have concerns with this tax policy. The CRA is responsible for administering the tax system and applying the current tax legislation as enacted by Parliament, while the Department of Finance Canada is responsible for developing and evaluating federal income tax policy and amending income tax law. Should you wish to pursue such concerns further, you may contact the Tax Policy Branch of the Department of Finance by writing to L'Esplanade Laurier, 140 O'Connor Street, Ottawa Ontario K1A 0G5.

We trust our comments will be of assistance to you.

Yours truly,

Sharmini Ratnasingham
For Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch